I’ve been pretty interested in how subscription business models seemed to have held up pretty well during the pandemic, even allowing more traditional businesses to stay connected with customers who couldn’t venture out to their bricks and mortar locations. But now that we’re seeing the light at the end of tunnel and getting closer to life without masks and social distancing, I wanted to see if subscription models will be just as attractive in the post-pandemic economy we can’t wait to get to. So I was excited to speak with Katrina Gosek, VP of Sales Portfolio Products for Oracle, to get her perspective as subscription management is one of her portfolio focus areas.
Interview with Katrina Gosek of Oracle
Below is an edited transcript of a portion of our conversation. Click on the embedded SoundCloud player to hear the full interview.
Small Business Trends: Why do you think subscription business models performed well during the pandemic, compared to more traditional models?
Katrina Gosek: Subscription models, if you’re doing it right, you’re providing consistent, unique value to the customer. So, I don’t think every subscription model is successful, to be honest, but where you’re in a pandemic, providing extreme value to a customer, you’re offering things that they can’t go out and get themselves. You’re bringing them goods and services. You’re letting them give you a little bit of cash over a predictable period of time versus having to shell out a lot of money all at once. It’s good for the businesses offering this because they have a predictable revenue stream, but it’s also good for consumers and also B2B companies, because they don’t have to shell out capital expenditures that can use operational expenses and do it more incrementally versus having to shell out a bunch of money at once. On a personal note, I discovered Instacart and I don’t think I’m ever going back.
Small Business Trends: Maybe you could also talk about Oracle’s approach to making subscription models easier to manage from a company perspective, because there are certain things that people are not necessarily all bought-in on subscriptions or offering subscriptions, or maybe they’re trying to figure out what’s the best way for us to approach them. Because they’re more of a traditional brick and mortar store, and they’re not a digital-first. So how does a company like that then begin to leverage the power of what subscriptions can do for them?
Katrina Gosek: You hit on something really key here, which is something that comes up frequently when we’re talking to customers; it is a complete cultural change with your customers. If you’re a traditional business, if you’re not subscription native, digital native, and you’re a manufacturer of some sort, whether it’s consumer goods or B2B goods, even high tech, industrial manufacturers, it’s a cultural change. Because now everybody who is in the business, not just salespeople, but marketing, finance, everybody. Customer success is now tied to revenue, so it’s important for everybody to have customer success at top of mind. So what does that mean?
It means that basically everyone that touches any interaction with the customer, from marketing, product development, sales, supply chain, customer service, customer success, everybody’s got to be thinking about the customer first, because it’s not just about that churn and burn quarterly… winning new customers every month. It’s about keeping the ones you have. It’s about offering them more value because, honestly, they could probably go find a similar service anywhere else. And the switching costs are much lower. So I think making sure that everybody who touches a customer has the data they need, the tools they need to be able to serve that customer in the best way, is extremely important for the health of the business as you’re moving to subscription models.
Small Business Trends: How could you leverage that from a subscription perspective to create a much more stickier offering?
Katrina Gosek: I think about it as real time data, which you mentioned, behavioral, clickstream data, social stuff, stuff that’s happening in real time, combined with lifetime data. You already have the customer, what do they already own? What is their usage? How are they using the product? What’s their billing cycle? What’s their contract? Where are they based? Maybe they have a couple different sites they ship to. So it’s that real-time data combined with the lifetime data. Once you have the subscriber that’s important to bring together because you’re talking about engaging in a lifecycle with a customer over hopefully a long period of time. So you need to make sure you’re getting actionable insights and you’re leveraging all of that data from the moment you acquire the customer to the moment they need to renew, or they need to upgrade, or they need to make a change to the contract.
You need to make sure you have all of that data in one place. And it’s sometimes for a lot of customers. Let’s say a device, like a phone with a subscription or a warranty or a service. You have to be able to combine the hard good with the subscription as well, which is a pattern we’re seeing more and more frequently in traditional manufacturing companies. You need to also have all that data in one place. It’s not just about digital interactions, but it’s also about interactions with physical goods as well.
Access vs Ownership – Car Subscriptions
Katrina Gosek: I’ll give you two examples. One’s more of a consumer example. A lot of auto manufacturers are looking at how to give customers a subscription to a car, and it’s not a lease. It’s actually a subscription to a car. So you can swap out the car. Let’s say it’s New England, it’s spring. It’s beautiful. I don’t want to rent a car. I want to have a nice luxury car and drive up the coast with the top down. But when winter comes, let’s say, I want to swap that out for an SUV with good snow tires, right. And it’s more than a lease. It’s a subscription to the auto service that lets you swap out based on how you want to use the subscription. Right.
There’s a famous example on the B2B side, I think it was Rolls Royce’s aircraft engines. They were groundbreaking in the early 2000s. They were actually putting telemetry on their aircraft engines and they were selling them to large airlines and charging the airlines by usage. So how much they actually used the engine, not for the actual engine itself. And we’re seeing that a lot more in high tech and industrial manufacturing, telemetry, IOT embedded in devices that allows you to track and monitor. I think that’s really interesting. That’s the next wave of that device-enabled subscription or physical object that allows you to subscribe to it in some way, shape or form. I think we’re going to see that a lot more in both consumer industries and business as well.
Small Business Trends: You’re seeing this pendulum shift to access versus ownership. Are we seeing that same pendulum shift when it comes to B2B versus consumers. Because consumers are seeming to be all bought-in on this stuff.
Katrina Gosek: Absolutely.
Small Business Trends: Are you seeing B2B companies looking for more access and not as much ownership when it comes to the things that they need?
Katrina Gosek: Absolutely. So I think I’m referring to it at Oracle as the “end of ownership” because people don’t want to own things anymore. We are seeing it in healthcare. Hospitals want to subscribe to an MRI machine and they pay for the pieces, the services that the company needs to run or, when a new technology comes out, they can swap out the MRI machine. We’re seeing it in farming equipment. Large tractor manufacturers, for example, are collecting data, agricultural data, from all of the different farmers who are using their tractors and reselling that data to their users to say, “This is the best time you should plant these crops, use this fertilizer. Here’s some things you should watch out for in terms of weeds or fertilizers,” and things like that. So we’re seeing a lot of that. We’re seeing crane manufacturers embed telemetry in their cranes so that, again, they can give a subscription to a construction company to the cranes, but the construction company doesn’t actually own it, because how often do you really need it? So really interesting stuff happening on the B2B side. I think we all experience it on the consumer side, but it’s some really cool stuff happening in tech, industrial manufacturing, the subscriptions.
Small Business Trends: Why don’t you talk a little bit about what you guys just announced, and how does those new additions to what you guys have with Oracle Subscription Management, how those additions feed into some of the things we just talked about?
Katrina Gosek: Going back to that idea I talked about of real-time and lifetime data, that is so important to having a subscription engagement with a customer and being successful at it; and empowering whoever gets to the customer first with that real-time data or that lifetime data. So you can have a full picture.
We recently released some awesome new churn probability prediction report. What does that mean? It means sales reps or customer success reps can identify issues that might be impacting a customer renewal. Let’s say they’re logging more SRs, or they’re not logging in as much, or they’ve changed their account settings or something like that. Some red flags that come up and that could alert a sales rep or a customer success rep to take corrective action around that.
We have a lot of prebuilt subscription reports, so that same sales rep or service representative, when they’re talking to a customer can see the full view of the customer lifetime value, what they own, their total contract value, what counts and products they have, and insight into that customer activity. Are they logging a lot of service requests? That’s a really cool thing. Giving the employees, helping customers visibility into some really granular level things to either course correct before a bunch of customers head for the door, or use it to improve the relationship.
We’ve built integrations also on the customer side, so all of this can be exposed to you, Brent, as a customer, if you log onto e-commerce sites, so you can see your own usage. You can manage upgrading or downgrading some of your services. You can request help from a sales or service agent all within that integration to the commerce application that we have subscriptions embedded in.
And the other cool integration we released was to service logistics. So imagine you have an internet outage, and the provider sends a service technician out to your home to fix it. Our integration allows that field rep, that service technician, to actually see your account and your usage patterns and your login, and make recommendations or adjustments on the fly in the field. And that means you’re a more satisfied customer because everybody who’s talking to you has the same view. So, lots of stuff going on, but, really cool stuff to enable employees to interact with customers better, and also customers to have better experiences with subscriptions as well. So really exciting space, yeah.
Small Business Trends: I like that part of it. Of course, companies want to be able to manage the subscriptions in an efficient way and be able to aggregate the data, to be able to create better products and services. But, also, I like the other piece of it: trying to provide the actual end user with even more say over how their subscription is being managed; how they want to be able to use it. And so I think it’s as important as the B2B side, the consumer side. Being able to allow them to have a little bit more control over it. Because once again, it’s like, they’re focused on access versus ownership, but they do want ownership over how they are accessing these products and services.
Katrina Gosek: Right. You want to be able to configure it. You want to be able to manage it. I’m sure you’ve experienced this too. Once you subscribe to something and then you’re looking at your credit card bill and you’re like, “I’m still subscribed to them?” And then you go try to figure out how to cancel it, and it’s impossible. Right? So, and the last thing a company wants to do, the last thing a customer wants to do is pick up the phone, wait, however long, when you can just do it online yourself. So that’s the problem we’re trying to solve with the e-commerce integration.
Adding Subscription Offerings Means Changing Corporate Culture
Small Business Trends: What advice do you have for folks who are still thinking about offering some sort of subscription offering?
Katrina Gosek: If you’re thinking about subscription business models, going down that road is just really acknowledging that it touches every part of the business. It is a complete relationship change with your customers. Again, it’s not that churn and burn, making the quarterly number. It you’re engaging now for a long period of time, an ongoing relationship with the customer, which means that your culture and your own company needs to change and how you treat your customer will have to change.
Because for example, finance, where they may have usually just been sitting in the back seat and doing forecasting and reporting, now their revenue is based on customer success. So, what we see is successful companies think of new packages, new offerings, look at the health of the customer relationship from a finance perspective. Marketing campaigns have to change. They’re not just throwing new products out there. You’re also marketing ongoing value of the business with the customer. Salespeople need to go back and talk to their customers over and over again and figure out what they can offer them, upsell them, cross sell them, maybe change their model a little bit. And then finally product development needs to really talk to their customers.
Small Business Trends: It seems so obvious, but yeah, you have to say it to a certain extent.
Katrina Gosek: You really do want to acknowledge it. I think sometimes, we’re all guilty of it. Whatever company you’re in is sometimes putting things out in a vacuum, but if you’re embarking on subscription models, I think you’ve got to acknowledge it’s a complete revolution internally for your own company. So you have to be ready for that, and you’ve got to think about how you’re going to handle it. And then if you are from the customer side, just talk to them. How would they like to, if you were to offer subscription models, how would they like to engage with you? Would they even want a subscription to a crane? And that way you can co-develop, which I think is so important. Co-create, co-invent with your customers. Because then it’s even more valuable to what people are looking for.
This is part of the One-on-One Interview series with thought leaders. The transcript has been edited for publication. If it's an audio or video interview, click on the embedded player above, or subscribe via iTunes or via Stitcher.